A 5-Step Guide Towards Selling Your Patent

A patent grant is one of the most crucial parts of the innovation process as it opens up quite a few opportunities for an innovator. First, it confers the ownership of the invention onto the innovator – thereby protecting the idea from theft. Next, it bestows exclusive rights on the inventor for its utilization. And subsequently, it recognizes the consistent hard work for months or even years that an innovator has put in to create something that never existed before.

However, owning a patent is just the beginning – how one is able to utilize this protected innovation is paramount. While the utilization aspect may vary from one innovator to another (depending upon individual choice), one can either sell or license it to others or market a product based on the underlying invention.

This guide explores the options of selling a patent in detail. It categorizes the whole process in five simple steps and systematically suggests ways to execute it, along with expert tips.

The five steps are:

Figure 1: Five simple steps to sell a patent

Step 1: Assessment of market applicability

The easier it is to materialize the invention as a product, the higher are the chances of selling the patent. Which is why the first step towards successfully selling a patent or a patent portfolio is to identify the patented invention’s market applicability. Here, we have to gauge two things:

First, how easy is it to create a product based on the patented invention.

Second, how commercially viable the whole process of production is? For example, whether the product has a demand in the market or not.

One of the best methods to gauge these two factors is by identifying any existing product or business process that infringes on the patent in any manner. It acts as a clear proof of the high market applicability of the patent or patents in the portfolio. At Sagacious IP, we perform Infringement Analysis to assess the same. This analysis helps identify the market players infringing the patent in hand. It implies that they are executing a process that overlaps with the patent’s domain. Thus, the patent is highly relevant to the market.

Once we have identified the infringement and its type, we can create our selling narrative around it and place our offer in a better light.

At times, when the portfolio comprises a wide variety of patents, it becomes important to keep focus on the most important patents in the set. At Sagacious IP, we identify the deal drivers using a multi-phase curated process – patents that have any existing infringement or solve a critical problem currently prevalent in the related market areas. Such patents are capable of driving a successful patent-selling deal.   

In addition to the above, we also identify enabling patents or the enablers in the patent portfolio. These patents are based on the same underlying concept as the deal-driving patents. However, they disclose some extra features of the inventions that deal drivers do not. These features may have a strong potential for infringement in the future. Therefore, the enablers can be put together strategically with deal-driving patents to offer an undeniable proposition to the potential buyer.

Moreover, understanding the underlying technology and its features also helps chart out all the possible market areas where a patent or patent portfolio may pose applicability. This way, they open new unexplored avenues for the utilization of the patent.

Step 2: Evaluation of the fair market value

Once we have established the high market applicability of the patent, the second step is to evaluate the patent and determine its fair market value. The evaluation is an essential part of the process as it keeps the innovator/seller well-informed on their patent’s worth. Hence, it results in better decision-making and keeps the seller well-positioned during negotiations. There are various approaches to realizing it; but the prominent strategies are described below:

Figure 2: Four Prominent Strategies for Evaluating a Patent’s Fair Market Value

1. Market-based Approach – Under this approach, the data for transactions of similar patents are analyzed to reach an estimated value. Although it is a straightforward approach, solely relying on this method is not the right strategy to chalk out a fair value. The reason being that the final value of the patent in a particular transaction depends on many variables, such as the dynamics between the involved parties, the patent’s infringement worth, etc. These factors are pretty distinct to a deal, and their effect on the patent value varies with every instance. Moreover, such transaction data is not readily available as well. So, the information is hard to find and does not serve the purpose entirely.

2. Cost-based Approach – Another possible method is when the value of a patent is determined by estimating the total cost of reproducing a similar patent. This approach considers the R&D cost, the patent filing and maintenance costs, and other related expenses. However, this is again not a reliable valuation on its own; it only considers cost-related aspects of evaluation, while several factors related to market and IP get overlooked. As a result, it does not consider the factors such as the infringement strength of the portfolio, the expected revenue it can generate, novelty and the relevance of the underlying technology.

3. Income-based Approach­ – In this approach, we calculate the worth of a patent, or a patent portfolio based on their potential for income generation. This approach considers the elements that gain income from the patent users. It considers the factors such as the remaining life of the patent or the portfolio, the revenue it can generate when productized, etc. However, this approach is also not very comprehensive. That is why, at Sagacious IP, we essentially follow a Hybrid Approach to determine a fair market value of the patent.

4. Hybrid Approach: This approach combines different methodologies and is the most comprehensive of all the above approaches. It helps the seller reach a well-calculated and reasonable patent value and is divided into two parts – Quantitative and Qualitative.

The first part of this hybrid approach is the Quantitative Analysis. It involves a market analysis of the technology under study, estimating how much revenue would be generated by the subject technology utilization, whether the technology is fresh or obsolete in the market, discount rate, etc.

In addition, many other factors capable of influencing the market are also considered to arrive at an expected value. These are listed below:

1. Total Addressable Market (TAM): This is the complete market coverage available to a product or service if they achieve 100% market share with no competition.

2. Market Coverage:  This factor considers whether the subject technology already exists in the market. If yes, where the patented technology stands in the market, its competitors, etc., are also ascertained.

3. Market/Industry Size: This examines the market size or the industry size relevant to the patented technology. Moreover, it also factors in the industry’s future growth prospects to determine a more realistic patent value.

The second part of the Hybrid Approach is the Qualitative Analysis, and is the most important one. It involves rigorous analysis of the Intellectual Property understudy.

Although we get an expected value from the Quantitative Analysis, the second part of Qualitative Analysis makes the evaluation even more reliable. Furthermore, since the applicability of the patent depends on numerous factors, it would be prudent to analyze these factors to understand the actual worth of the Intellectual Property.

There are over 15 factors considered under this part. Each of these is assigned a different weightage based on their importance.

A few of such critical factors with a higher weightage is discussed below:

1. Market Applicability: It covers the aspect of the patent’s applicability to the market and directly impacts/drives the overall valuation of the patent. As mentioned above, we execute Infringement Analysis to assess the same.

2. Competition: This factor assesses the competition level that the patented technology may face. It covers two phases: the first is Competitiveness, i.e., the quality of competition, and the second is Crowdedness, i.e., the quantity of competition. Crowdedness is a measure of market penetration. Considering the existing products that the new idea/product/invention will compete with, the barriers to market entry are likely to be low, high, or moderate. Competitiveness is a measure of quality, bearing in mind the existing products that the new invention/idea/product will compete with (including price, quality, etc.); the invention/idea/product will likely be perceived as inferior or superior with added advantages.

3. Life of the patent: This factor takes account of the remaining life of the patent from the time the deal is reached. Through this information, the buyer gets to know about the time period under which they can utilize the patent. For example, if someone is buying a patent, they would need to know how long he would be able to protect the idea from others using/copying it. A patent about to expire soon might be less valued as compared to a patent with ten years of remaining life. Therefore, the patent life is a vital determinant in the buying strategy.

4. Reason for Allowance: This factor covers whether the reason for allowance was based on a broader or narrower technical concept. For example, if the patent was granted on a broader concept, such as making a group video call, it would be more valued than a patent that was granted on a narrower concept such as muting/unmuting a participant in a group video call. And the same would be valued differently to a patent claiming a procedure to schedule a group video call between participants. 

Reason for Allowance is the basis on which the patent has been granted. It implies that the claims made in the patent should have ample coverage for the successful utilization of the patent. For this, the analysis of the patent prosecution history is made to determine the coverage. The broader the concept covered under the patent, the higher its value. Besides, it can drastically reduce or increase the value of the portfolio.

5. Buyer’s need: This factor considers the buyer’s nature or needs. The value of a patent/portfolio actually varies from buyer-to-buyer, depending on what their end objective is. As a seller, it becomes important to define the current value of the patents in the context of the specific situation with the buyers. One must evaluate how a buyer would use these patents in the future and gauge the worth of these patents today and in the future.

For example, if someone is buying a patent/portfolio to prepare defence against their competitors, and these competitors are already encumbered, then the value of the patent/portfolio would drastically decrease for that buyer as they would not be able to protect themselves using these patents against their competitors. The effect could be so much that the buyer might not want to buy these patents at all.

6. Encumbrances: Here, it is checked whether there are any existing encumbrances on the subject patent portfolio. For example, a patent licensing agreement is an encumbrance because it prevents a company (buying a patent) from obtaining royalties from a company that has already licensed the patent. This can limit the applicability of the patent and, thereby, reduce its value.

Step 3: Identifying the potential buyers

After evaluating the best possible value for our patent, now is the time to identify the potential buyers. In the third step, we search for the players that might be interested in the subject technology of the patent and there are several ways to do so, as outlined below.

The easiest way is when you have identified a potential infringement – to locate the market players who are infringing on the patent in any manner. Such infringers become our primary target to pitch the offer and can be given two options. Either they can buy/license the patent or alter their process to avoid infringement. If the infringer is not ready to accept any of the two, they can be cautioned with litigation.

However, if there are no infringements, the other way is to look for the players facing the same problems. These are the players operating in the related domain and can benefit from the patent’s subject technology. This is done by searching around companies in the related field to understand the nature of their business and the challenges they face. Once they are found, they can be apprised of the solution to their problem using the patented technology. This will enhance the chances of selling the patent at a reasonable value; eventually creating a win-win scenario for the seller and the buyer.

Another way is to locate the players filing patents in the same domain. Identifying such players would mean that they are interested in the respective technical field and may buy the patent. The reason is that the addition of such patents will bolster their patent portfolio, and, hence, they can be the prospective buyers.

One can also search for the players looking for opportunities to enter the market. Such players would need an edge to compete with the market leaders, and a patent related to that particular field can be of great use to them. Hence, purchasing a patent that gives them the required edge over others is likely. Reason being – taking licenses from market leaders could be very expensive or even not feasible; doing in-house R&D can also prove to be costly. Therefore, buying the patent inorganically becomes the best choice for them.

Therefore, while searching for such players, the seller should check whether the company has in-house R&D practice or a history of patent/company acquisitions (inorganic growth). An in-house R&D practice indicates that the company is into organic growth for its patent portfolio and may not be very keen on buying them. However, if it has a history of acquisitions, it is more inclined towards organic growth, and it may readily purchase the patent.

Hence, companies opting for patent or company acquisitions to grow their patent/product portfolios could be good candidates for selling the subject patent portfolio.

Step 4: Approaching the identified prospects

In order to finalize the identified prospects, it is crucial to take the initial steps of reaching out to the prospects properly. While a proper strategy can lead to the desired outcome, a wrong one can close the deal before it starts.

Therefore, for an apposite execution, the preliminary step is to package the list of patents properly. And this should reflect in the insights offered by an Infringement Analysis. This way, it keeps the pitch more aligned to the needs of the market and the client. At Sagacious IP, this is made easy by including inputs from Infringement Analysis, wherein the deal drivers and the enabling patents are identified and appropriately packaged, as explained above.

A Pitchbook is prepared to reach out to prospective companies and negotiate the price in this step. It includes all the information that helps a potential licensee/buyer understand how a particular invention can benefit them. For example, it contains facts about the patent, the relevance of technology, the problem it addresses, market study, other benefits, etc.

To summarize, we execute the given set of activities to keep the process of patent selling organized and aligned to the seller’s goals by:

  • Preparing an exhaustive list of potential licensees/buyers for the patent. In addition to this, the relevant contacts in these companies are identified to discuss the deal in detail.
  • Secondly, a teaser of one or two slides is created based on the pitch book as a flyer. And it is sent to the identified contacts in the companies.
  • Next, upon the client’s approval, the profile is broadcasted to the potential companies facing the same problem that is being solved by the patent.
  • Lastly, periodic email follow-ups are done with the potential buyers to seek their interest.

Moreover, the following points should be duly considered while performing the above activities:

  • First, it is imperative to choose the right contact at those companies. This depends on the strategy with which we had identified the companies in the first place. For example, if we have identified the company because they file patents in a similar domain, we need to reach out to the portfolio managers, patent acquisition people, etc. However, if we have identified the companies facing a technical problem, of which the subject patent provides a solution, then the right people to reach out to will be the product VP.
  • Further, it is very tough to convey all your research over an email and expect the prospective buyer to show interest. Hence, we must explain the corresponding strategy of how companies are mined and filter the patents that could be vital for them. It is done by explaining the prospects on why a particular patent could be of interest to them and why they should buy it or at least assess it.
  • Next, it is critical to plan who is reaching out to whom. If you don’t have a prior relationship with the company, the chances of cracking a deal are low. It stands even more true in the case of big companies. They may not even entertain such emails. For instance, companies such as Google don’t get involved in such deals directly. Instead, they prefer to buy it through aggregators.
  • Lastly, maintaining secrecy is essential for both sides i.e., the seller and the buyer.

Step 5: Negotiating with prospects and deal closure

After approaching the buyer in a suitable manner, the next course is to execute the deal systematically. It is also done in two parts:

In the first part, the seller and all the interested buyers enter a Confidential Disclosure Agreement (CDA) or Non-disclosure Agreement (NDA). These agreements are crucial to safeguard the patented information and other critical insights from being leaked into the public domain.

Once the CDA is in place, the seller can supply further details with certainty. Here, IP service providers can significantly facilitate coordination among the parties. For example, at Sagacious IP, we conduct various conference calls to ensure that all the participants are on the same page before the negotiations start. In addition to this, we also attempt to reach a mutually acceptable deal by offering our support in structuring it.

Besides the above, it is essential to ensure that these dialogues result in a win-win situation for both parties. For this, the buyer must be clearly informed of all the details, including the encumbrances on the patent.

Additionally, the seller has to keep in mind that the buyer will evaluate the patent and present reasons to lower the asking price. Here, referring to the points and facts from the pitchbook would help better negotiate the deal.


And once the negotiations are over, the deal closure would involve reassigning the patents to the buyer.

A Systematic Approach to Attain Goals

As conversed in the initial phase of this article, the ultimate goal of an invention is not to gain a patent. Instead, it is to utilize the patent to its full potential. The inventor’s purpose can be any, but if they decide to sell the patent, the above-mentioned five-step process should be diligently followed.

To sum it up, a systematic approach that starts from assessing the patent’s market applicability is the key. This helps the inventor make well-informed decisions related to the patent selling process, including whether to sell the patent at all! It also weighs on the various methods of patent evaluation so that the seller knows the fair price of a patent. And it also ensures that the buyers do not undervalue the patent.

Further, it also informs ways to identify the right buyer for the patent. Thus, combining the last two, the patent is sold to the right buyer at the right price – resulting in a win-win scenario.

Merely identifying the right buyer is not enough, and the seller should approach them in the appropriate manner as well. Towards this end, the guide also shares tips and tricks to reach out to the buyer with the best possible chances of cracking a deal.

And lastly, it prompts ways to hammer out the best possible patent deal during the negotiation phase. It includes highlighting the deal drivers and the enablers to put forward the best patent package during the deal.

It is important to ensure that the complicated processes are more straightforward in the best way to achieve high returns on investment. The investment can be monetary, or perhaps even the time invested in innovating something new. A patent is not just a document but a representation of the hard work by an innovator. At Sagacious IP, we offer services from consultation and analysis to the execution of all-encompassing searches that help you make the best out of your invention. Click here to know more.


– Abhinav Mahajan (ICT Licensing) and the Editorial Team

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